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Homeowners renting properties for productions

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Homeowners looking to sell their properties have every right to be feeling a little grumpy these days -- or, given the circumstances, downright panicked. As a once-hot market continues to cool, homes are taking a lot longer to find buyers, which can put owners into a perilous financial state.

There are the exceptions, of course: Stephen Shapiro, co-owner of the luxury real estate firm Westside Estate Agency, says he saw sales for his company climb 70% in the fourth quarter of 2007, compared to the same period in 2006. Despite a recent DataQuick report that found Los Angeles County homes have decreased in appreciation by 12% this year, "The high-end business is stronger than ever," insists Shapiro, one of the few voices of optimism in the current climate. "If a house is sitting on the market, the seller just isn't motivated. If it doesn't sell within a year, the problem is the price."

But for those sellers who beg to disagree, there is a silver lining to be found, and it's on the silver screen: By renting one's home out for TV, movie and commercial shoots, as well as magazine editorials, owners can recoup thousands of dollars -- some tax-free.

This realization has caused location companies, which act as liaisons between the production companies and homeowners, to be flooded with calls from people eager to list their properties. Most surprising, say the call recipients, is that a large percentage are coming from an upper echelon of sellers: multimillionaires with multimillion-dollar homes. In the past, for this group, the income of a movie or TV shoot might have been laughable.

"For us, it was always important to look at homes that were on the market because great houses here, especially the big ones, are difficult to find," says former TV exec and Malibu Locations' co-owner Marshall Coben. "They're up long driveways, and you don't necessarily know where they are. But when they go on the market, you can find the picture on MLS (Multiple Listing Service)."

Despite Coben's long-time campaigning for agents, however, "We were told the idea was ridiculous," he says. "Now it's a phenomenon, but it was completely rejected as an idea by realtors and homeowners alike in the past. Literally no one -- and I mean no one -- would allow their homes to be used for locations when they went on the market because they expected a lot of activity and quick sales. Then, all of a sudden, we started getting calls from the realtors -- the same ones who would never return our calls."

One of those calls was regarding an estimated 20,000-square-foot home in the Pacific Palisades with city views.

"Mansions in Hollywood and the Hills are one thing," says Coben, "but you don't get mansions in the Palisades; and here is this home sitting on the market for around $20 million. Needless to say, these are not houses that would normally be in the business of filming, since a few thousand dollars here or $100,000 there, in income, is generally insignificant to the owner of a $20-million home," he explains. "It really speaks to the desperation of the real estate market right now, that these homes are competing with each other for the few thousand dollars a film shoot can bring in."

Another of Coben's recent windfalls is a $17-million, steel-and-glass beach house in Malibu that was booked for two weeks for New Line's upcoming "Sex and the City: The Movie" (a house like this can earn up to $100,000 for a similar shoot). "Never in a million years did I think we would get that house," he says. "But houses are sitting on the market, especially the spectacular ones. And with people having put so much money into building them, they can't afford to sell them at a loss."

The owner of that Malibu home couldn't have done better. By California law, if a homeowner rents his or her home for 14 days or less annually, the rental income is tax-free. An additional benefit, explains Westside Estate's Shapiro, is that it enables a house to be turned into an income property. "If you sell your home, you have to pay capital gains," he says. "But if you convert it to an income property before you sell it, you can take the cash you made, put it into another income property and defer taxes."

But with most people just looking to defray some of the mortgage and maintenance costs that accumulate from carrying a home longer than desired, how feasible is the idea of renting out the homes for locations? "I definitely have some homes listed where the owners decided not to try to sell in this market, and use it as a film location instead," says Cast Locations' David Hatfield. "But it's a misunderstanding to assume you're going to fill up a home with back-to-back bookings. Plus, filming more than 14 days in one location can be a bad idea: The owner starts paying taxes and the neighbors start going crazy."

In terms of accessing demand, homeowners should manage their expectations unless their property, like the "Sex and the City" steel- and-glass Malibu beach house, is truly unique. "There's a big difference between commercial and residential properties," says Real to Reel Locations' Hunter Davis, whose company books both. "If you have a vacant office floor with cubicles and the area is film-friendly, that's a gold mine that will film all the time. But for an average, 3,000-square-foot home -- whatever that home may be -- at most it will probably film only once or twice a year." That said, "You never know," says Davis, who urges clients to go ahead and take the chance. "You could get the home-run ball with a (TV) series."

For those houses that do hit the home run, owners not only get extra income and bragging rights, but could increase their property values as well. "Without a doubt, that happens," says Madison Locations' Sean Harrington. "Let's say a popular show like 'Grey's Anatomy' is filmed there, or take the house we represented that was in (2007's) 'Fracture' and was bought after filming. The prestige appealed to the buyers, but so did the fact that they could come to list with us again and help their income. The (1991 and 1995) 'Father of the Bride' house in Pasadena has been filmed so much," he continues, "you can almost bank on a residual income year after year. It's fun, but it's also lucrative. And realtors, if they're smart, should really focus on that when they're selling a house."

Still, listing a house that's on the market can have its downsides for both the owner and the listing location company. Cast Locations' Hatfield requests at least a year-long commitment that the home will be available, before he takes the time and spends the money to photograph and market the home; while Real to Reel's Davis is a bit more laissez-faire, saying, "I don't care if it's on the market at all, but we certainly would appreciate if we got a phone call, as soon as possible, that the house has been sold." Davis adds that there have even been instances when the company benefited from a property being on the market: "If a homeowner has great pictures taken to sell the house, and we're not going to do any better, that expedites the whole process since we don't have to schedule an appointment to shoot it," let alone pay for it.

Ultimately, says Madison Locations' Harrington, the issues that come up involving a house on the market are all solvable with an honor code policy of being straightforward with the location company. Then, it can do the same with the people interested in booking it. "In terms of who would be responsible if a house sold: It wouldn't be the location company because we have full disclosure with the location manager or scout," he explains. "If they're interested, they have to understand that the location can fall out, and therefore, they're looking at plan B. But in any case, it's rarely an issue since you're not booking homes more than 30-60 days out. Even if you have a property that sells, escrows are at least 30 days, and we're seeing the escrow period grow longer."

There are times when renting out a house that's on the market can work against the owner. Ironically, it's most often when the house hits the home run and gets booked for a series. Says Malibu Locations' Coben, "We had a problem on the home that was Larry David's house in 'Curb Your Enthusiasm.' The house was on the market for a long time, all the way through filming, but it was very difficult for the sellers. You have to write it into the contract that the new owner is obligated to honor the filming contract in place; and all the prospective buyer has to say is, 'I won't do that,' and the house doesn't sell. And even if you have that contract in place, you can still have real problems for the film or series, because then you can have an aggressive, angry homeowner."

But it's more often the case, especially in this time of a depressed housing market, that owners are enthusiastically opening their domains to film crews, which are, in turn, eager to hand over generous checks for the privilege of borrowing the space.

"The reality is there are no indicators that the market is going to go back up. And the truth is that the real estate and location communities are hand-in-hand," Harrington says. "If we can utilize those homes for filming, I don't know anyone who wouldn't want that income, especially if you're trying to sell your home."

"What's the downside?" asks Davis. "There's absolutely none. The worst thing that happens is your home doesn't get booked. But the best thing is that you get booked with a high-end production, and you have an agency running it all for you and you have peace of mind."

No matter the permutations of the deal, what's clear in the current market is that the buyer and booker clearly have the upper hand, whether the property is worth $1 million or $20 million. Even in the wake of the writers' strike, says Coben, "My company has never been as busy as it's been in the past six months. We're calling real estate agents and asking if we can hire their assistants, and by the end of the call, the agent is offering us his or her own house for locations. We used to be the disrespected stepchild of the market, and suddenly, we're the (ones) holding all the keys. Everything has turned upside down."

See some of the properties that are hot on the market on next page.

Representing high-end architectural homes, realty firm Deasy/Penner & Partners finds that its listings, such as this four-bedroom Mid-Century compound in Alhambra, left, and this platinum LEED-rated Venice home, right, are often sought after for film, television and commercial shoots. These two homes are currently listed at $1.2 million and $2.7 million, respectively.

Designed by Edward R. Niles and remodeled by Jay Vanos, this ultramodern 5,800-square-foot Malibu beach house hosted filming for New Line's upcoming "Sex and the City: The Movie" in January. Situated right on the sand, it features four bedrooms, six bathrooms and stunning three-story glass arches that look out onto the Pacific. This home is represented by Malibu Locations.

With picture-postcard views of the coastline and the Pacific Ocean, this 2-bedroom modern home is located in the Pacific Palisades and boasts 3,500 square feet of luxurious living space. Represented by Malibu Locations, this home was designed by the late Frank Israel. Last year, it hosted filming for Warner Bros.' "What Just Happened?" starring Bruce Willis, Stanley Tucci, Sean Penn and Robin Wright Penn.

Recently featured on NBC's "The Office," this 6,000-square-foot American colonial-style Encino mansion was built in 1938 and renovated in 2005. It has plenty of room for parking and has hosted numerous shoots over the years. It's especially desirable for filming, as it's one of the neighborhood's last untouched estate properties without palm trees, which immediately identify a home with Los Angeles. Represented by Real to Reel Locations.

Pasadena's historic (and unoccupied) 6,000-square-foot Hulett Merritt Mansion is a two-story colonial, which features eight bedrooms, four bathrooms and a ballroom. It has been beautifully maintained in its original condition, complete with stately white columns. Built in the late 1800s, it features handsome wood interiors with large rooms that look out onto the property's two acres of unique, manicured grounds, which include a charming pond and elaborate fountain. Represented by Real to Reel Locations.

This sleek, modern 8,000-square-foot mansion located in the Hollywood Hills boasts meticulously kept grounds, a sparkling pool and breathtaking views. It feels as open and airy inside as it does out, with recessed lighting, five bedrooms, nine bathrooms, no fewer than three kitchens, a six-car garage and a dramatic spiral staircase -- just the kind of unique feature that often catches a location manager's eye. Represented by Real to Reel Locations.

Located in the Madison Heights neighborhood of Pasadena, this four-bedroom, two-bathroom 1925 Craftsman bungalow has hosted commercials for Burger King, Carl's Jr. and Pepsi, among others. Featuring hardwood floors and a Batchelder fireplace, it's the perfect home for productions seeking a "traditional American" setting. Represented by Madison Locations.